Although many people don’t like to dwell on the negative aspects of life, if you are taking out a guarantor loan, you should prepare yourself for what happens if you are unable to pay your loan. Whatever lending company you choose to apply to will have terms and conditions listed on their website, and this will provide you with information about what will happen if you fail to make a payment on time.
Knowing what is in store in the worst case scenario is vital for planning ahead but a significant number of guarantor loan applicants do not think in this manner. This is why so many people suffer problems when it comes to guarantor loans and you should look to make sure that you are not caught unawares by anything relating to your guarantor loan.
Do you really need a Loan?
Before you take out a loan, you need to consider whether you actually need a loan. If you take out a loan and are unable to pay it, you’ll find that there are added costs involved and there is also going to be a negative impact on your credit score. Given that many people who take out a guarantor loan already suffer from a poor credit score, you’ll find that taking out a loan and not being able to pay it will further harm your credit score, making it even more difficult to obtain finance in the future.
You can be sure that if you fail to make a payment, the guarantor loan company will be quick to contact you. They will also likely impose a penalty fee, although this is something that will depend on the individual terms and conditions of the loan. This may come in the form of a default payment or you may incur additional interest charges.
There is also a lot to be said for never taking out a guarantor loan to pay off an existing loan that is due to be paid. If you can consolidate a number of debts and pay them off in one go through a guarantor loan, this is a sensible use of your money but if you are taking out a guarantor loan to meet a monthly payment, you will find that this often leads to a negative spiral, which sees you having to borrow money monthly to pay off your bills. This is an unsustainable habit to get into, and it is something that has caused significant problems for many people.
Will your relationship with the Guarantor be harmed?
You also need to think about the impact of not paying your loan on your relationship with the guarantor. A guarantor is a great responsibility and it may be that if someone is forced to pay off a debt for you, they will not feel as though they can be in a friendship or relationship with you. There are many things to think about when looking for a guarantor but you need to make sure that your relationship can withstand the difficulties and issues that may arise from not paying off the loan.
If you realise that you will not be able to make a payment, the first thing you should do is get in touch with the lending company. If you know in advance of the payment date that you will be unable to meet the requirements of the loan, you should explain the situation. You may find that the lending company is able and willing to provide you with a degree of flexibility with respect to the loan. They may even look to offer a payment plan or a way of lowering the cost.
This may not be the case and every lending company is different but if you are honest and open enough, you may find that a lending company will do what they can to provide you with an additional level of support and assistance when it comes to dealing with a guarantor loan debt that you cannot handle or deal with.
If you are not honest and open about the debts, you will find that the lender will be far less sympathetic to your needs. This means that you will be more likely to face the daily interest charges and the default fees that are associated with a loan.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.